Jan. 6, 2017

Priorities for 2017 address key opportunities

Happy New Year! With 2017 underway, NASCUS is sharpening its priorities particularly as it views opportunities and challenges already shaping up. Here’s a quick rundown:

Obtain fair, transparent and understandable OTR methodology: In 2016, for the first time since 2013, the overhead transfer rate (OTR) was reduced by the NCUA Board – following strong advocacy by the state credit union system and NASCUS. In the wake of last spring’s OTR comment period, NCUA Board members have voiced interest in addressing this year how the OTR is determined. NASCUS will be working with them along the way to bring about the fairness, clarity and common sense that the OTR deserves.

Advocate consideration of supplemental capital: With an expected “advance notice of proposed rulemaking” on supplemental capital use by credit unions to be considered at the Jan. 19 NCUA Board meeting – and past vows by NCUA Board Member Rick Metsger to “move as expeditiously as possible” on the issue – a long-time goal of NASCUS is coming into view. Challenges remain (including those related to tax implications, fraud prevention, investor suitability, disclosures and others), however NASCUS is committed to supporting this critical tool for enhancing credit union safety and soundness, and will be part of the discussion.

Designate a seat on the (expanded) NCUA Board for a state regulator: Regulatory reform is in the legislative air with the 115th Congress, with renewed push for legislation such as the Financial CHOICE Act, which would expand the NCUA Board to five members. In concert with a long-term goal, NASCUS will be urging lawmakers to use the opportunity of regulatory reform to designate at least on seat on the board for a member with state regulatory experience.

Facilitate interstate branching for interested states. Ability for state charters to open branches across state lines is an important option, but remains a substantial advantage of the federal charter. While there are in place two regional interstate branch agreements (the 2009 Southeastern Agreement, which includes signatories of AL, FL, GA, IL, MS, MO, NC, TN, TX, WA; and the 2015 Interstate Branching Agreement, which includes signatories of ID, IL, IN, KY, MI, OH, OR, TX, WA, WV, WI), NASCUS is exploring a single national compact and other avenues through a special task force.

Preserve and protect charter choice and the dual-charter credit union system: At the heart of NASCUS’ mission is our commitment to a dual chartering system – and the choice of credit unions to select the charter that works best for them. Doing so assures that American consumers prosper from ongoing modernization and innovation in both the state and federal regulatory frameworks, and guards against federal regulatory overreach and makes for a stronger credit union system overall.

We’ll keep our eye on other key issues as well, including regulatory clarity for credit unions serving the legal marijuana industry, the implementation of the Current Expected Credit Loss (CECL) accounting standard, the evolution of NCUA’s exam flexibility initiative, and much more.

We’re also upholding our commitment to inform state system of the latest issues and trends, through our communications programs and our education agenda – including our signature events the Cybersecurity Symposium (June 5-6 in San Diego), our Bank Secrecy Act (BSA) Conference (Nov. 12-15 in Las Vegas), and the NASCUS Summit (Aug. 29-Sept. 1 in San Diego).

MBL RULE TAKES EFFECT, MOVES FORWARD (DESPITE CHALLENGES)

NCUA’s new member business loan regulation went into effect Sunday (Jan. 1), with the agency taking other actions to fully incorporate the new rule into its regulatory reporting system. Last week, the agency filed an “information collection request” with the Office of Management and Budget to formally revise its 5300 Call Report and 4501A (Credit Union Profile). According to the Dec. 28 notice published in the Federal Register, NCUA’s proposed changes to the forms are aimed at capturing “applicable data implemented” by the updated rule, adding that the changes “involve moving loan details to a separate page and revising the Call Report loans and business lending, and Credit Union Profile programs and services sections to reflect ‘commercial’ lending terminology.” Comments on the form changes are due by Jan. 27. The effective date of the rule comes despite court challenges by banker organizations to the regulation in general, and inclusion of the new rule on a list of regulations “recommended for removal” by a group of members of Congress. However, reports this week indicate that the group has agreed to drop the business lending rule from its list.

LETTER OUTLINES RISK-BASED EXTENDED EXAM CYCLE

Most federally insured, state-chartered credit unions will receive an NCUA exam based on risk, and at least once every five years, according to a Letter to Credit Unions issued by the agency last week outlining the steps the agency is taking to “permit an extended examination cycle.” Additionally, the letter (LTCU 16-CU-12 – which NASCUS has summarized, for members only) outlines the exam scheduling for federal credit unions as well.

FISCUs subject to more frequent exams would fall under any of three criteria outlined in the letter, and will receive NCUA insurance examinations that start between eight and 12 months from the prior exam date. The criteria for those FISCUs are:

The credit union holds assets of greater than $1 billion;

The credit union has a composite NCUA CAMEL 4 or 5 code and assets greater than $50 million;

The credit union has a composite NCUA CAMEL 3 code with assets greater than $250 million.

“NCUA will make every effort to conduct examinations of federally insured state-chartered credit unions jointly with the appropriate state supervisory authority,” the agency states in the letter. “Only when a joint examination cannot be coordinated would NCUA conduct an independent insurance review. The NCUA letter also noted that a joint NCUA-state supervisory authority working group is being formed to “evaluate and recommend further changes to the agency’s examination program for federally insured, state-chartered credit unions.”

… AND EVEN MORE SUMMARIES AVAILABLE TOO

Analyses and summaries of the year’s Letters to Credit Unions issued by NCUA have been posted by NASCUS on its website, as well as additional summaries of final and proposed rules. Highlights among the most recent letters: LTCU 16-CU-13, “FAQ on the New Accounting Standard on Financial Instruments – Credit Losses,” which outlines advance steps to take before implementation of the new “current expected credit loss” (CECL) accounting standard; LTCU 16-CU-11, “MBL Guidance Added to Examiner’s Guide,” which is aimed to help credit unions understand NCUA’s supervisory expectations for commercial lending; and 16-CU-08, “Revised Interest Rate Risk Supervision,” which looks at changes to the agency’s interest rate risk review procedures. Among the latest proposed, final and interim final rules recently summarized: NCUA Final Rule, FCU Occupancy (affects only FCUs); NCUA interim Final Rule Summary, Revisions to FOIA policies; NCUA proposed rule, FCU field of membership policies for community charters, and; CFPB executive summary of amendments to certain mortgage servicing provisions under Regulation Z (and interpretive rule under the Fair Debt Collection Practices Act (FDCPA), relating to servicers’ compliance with certain mortgage servicing provisions).

CONSUMER BUREAU TAKING CU COUNCIL NOMINATIONS THROUGH MARCH 1

Nominations for appointment to the CFPB’s Credit Union Council (CUAC) will open in about two weeks (Jan. 16), with candidate applications due on or before March 1 to be considered for a slot on the council, The bureau expects to announce selection of new members in August to the CUAC (as well as its Consumer Advisory Board and Community Bank Advisory Council). Members of the councils and board are drawn from representatives of consumers, communities, the financial services industry and academics, according to the bureau. Appointments to the board are typically for three years and appointments to the councils are typically for two years, CFPB stated. The agency also noted that “Only complete applications will be given consideration for review of membership on the Board and Councils,” and that “the bureau will not entertain applications of federally registered lobbyists for a position.” Applications may be submitted electronically (strongly encouraged by CFPB), or by mail or courier. See the link below to the notice in the Federal Register for complete submission addressing details.

WEBINAR TO FOCUS ON CYBERSECURITY RESOURCES

The Financial Services Information Sharing and Analysis Center (FS-ISAC) – a group focusing on cyber and physical threat intelligence analysis and sharing, and counts as members more than 550 credit unions, as well as NASCUS – is hosting a Jan. 12 “Cybersecurity for Credit Unions” webinar at 1 p.m. ET. Designed specifically for credit unions, the one-hour program will describe how the organization can help credit unions stay current on cybersecurity threats, as well as services and solutions offered to combat the dangers. For more information (including registration), see the link below.

Bryan A. Schneider, Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR), has been appointed to a one-year term on the NASCUS Board of Directors by Chairman Mary Ellen O’Neill. Schneider joins the eight-member board, which includes newly elected members Janet Powell, manager, credit union program for the Oregon Department of Consumer and Business Services, and; Steve Pleger, senior deputy commissioner for the Georgia Department of Banking & Finance (who was re-elected to the board). Terms for both Powell and Pleger end in 2019 … More speakers are joining the faculty of the 2017 NASCUS/CUNA Cybersecurity Symposium, June 5-6 in San Diego: Chad Carrington vice president for IT, Cybersecurity, and Facilities for Golden 1 Credit Union and Patrick Sickels of CU*Answers, who designs risk models and control frameworks; Jim Stickley of Stickley on Security is the keynote speaker, and the two-day session will be led by Randall Romes of CliftonLarsonAllen … Our Kentucky Directors’ College, sponsored in partnership with the Kentucky Department of Financial Institutions and the Kentucky Credit Union League, is just a month away; it’s a terrific program for kicking off a new year to discuss the key issues … The State of Iowa Division of Credit Unions is searching for a credit union examiner supervisor; see the job listing on the NASCUS website under “career opportunities.”